Apr 26, 2016
Buying a franchise or an existing, proven business model is a good way to reduce risk in tough economic times, say experts participating in the upcoming #BuyaBusiness Expo.
“With unemployment nudging the 25% mark and food prices rocketing, thousands of South Africans are looking to starting their own businesses as a way to survive and thrive. However, securing financing and developing a sure-fire business model are not easy. Business development experts report that the single biggest reason for new businesses failing is a lack of business management expertise on the part of the entrepreneur. The new business owner may be an expert in their field – be it baking, engineering or software development, for example – but if he or she does not know how to market the business, sell the product and manage the business’s finances, their business is immediately at risk,” says Carol Weaving, MD of Thebe Reed Exhibitions.
Buying into a proven business model helps to reduce this risk, particularly if the investment comes with support and guidance, say participants in the #BuyaBusiness Expo, to be staged by Thebe Reed Exhibitions at the Ticketpro Dome in Northriding in September this year.
Before investing in a business, it is important to consider whether there will be a market for the product or service, they advise. And in tough economic times, it is crucial that the product or service is priced right. #BuyaBusiness exhibitor Zhauns Business Opportunities & Engineering has ensured a long list of success stories for its customers, who buy equipment from Zhauns to produce goods their markets want, at affordable prices.
Zhauns sells machines for making everything from toilet rolls and envelopes, to pencils, bricks and charcoal briquettes. Its customer success stories include Pabcods Trading in Limpopo, which produces over 5 600 toilet rolls a day to meet local demand; and Big Brand Marketing in Johannesburg, which now employs eight people to keep up with demand for their toilet paper.
Zhauns director Riad Ahmed says the company, with over 15 years’ experience in Africa, has identified a number of FMCG products ideal for entrepreneurs to sell into their local markets.
“A lot of it is based on common sense. There are products everyone uses and needs, and there are opportunities for entrepreneurs to challenge major manufacturers by producing these products for sale in their local communities.”
Toilet paper is a case in point. Ahmed notes that until a few years ago, there were only a handful of major manufacturers in South Africa. Now, entrepreneurs buying machines to make toilet paper are able to work out of small premises with only three or four staff members, reducing the overheads and transport costs involved in the making of toilet paper. This allows the entrepreneurs to produce toilet paper for their communities at a very competitive price.
While this increases their chances of success, it does not assure success, however. Ahmed notes: “We provide the tools, teach them to operate the equipment, and ensure they have a marketable product. We can even refer them to business management training courses. But at end of day it’s the jockey riding the horse, so the entrepreneur is responsible for the company’s success.”
Through many years of working closely with entrepreneurs, Zhauns has pinpointed funding and financial management as the biggest hurdles in the way of the new business’s success. “Securing financing is very difficult. And often we see new business owners failing to reinvest all the money they make in the first year or so. They look at cash flow and treat it all like profit, which is a mistake.”
At the #BuyaBusiness Expo, Zhauns will showcase business opportunities priced as low as R5 000, for machines for key cutting or juicing.
Debbie Martins, area development manager – sub-Saharan and Southern Africa at fast food franchise Subway, says times are tough for business owners and consumers alike.
“Fortunately, people always need to eat, so food businesses tend to survive better than companies in many other sectors when the economy is under pressure,” she says.
Subway has an international model that drives traffic to stores through ongoing special offers. “We are constantly aware of the need to offer a discounted item in store for those who are cash strapped. These offerings are normally through a ‘Sub of the day’ or ‘wow’ campaign which discounts subs drastically to increase feet and get customers through the front door. These same customers will come back and spend money on items at full price when they have extra income to spend. It’s vital to reward brand loyalty, and therefore we also offer a loyalty programme called the Sub Club card.”
Subway’s years of international experience in what works to keep customers streaming in benefits the franchise’s new franchisees, and reduces the challenges involved in launching a new fast food business. However, Martins warns: “Just because you’re buying into an established franchise doesn’t guarantee you a successful business. Success is up to the individual at the end of the day. If you’re not well suited to the brand, the business won’t succeed. You have to have an aptitude for the kind of business you are buying, and you must be willing to put in the long hours needed to make it succeed.” Subway, which will showcase opportunities for the resale of established stores at the # BuyaBusiness expo, conducts extensive aptitude and personality tests with potential franchisees, to ensure they are a good match for the brand, and so increase the franchisee’s chances of success.
Another business opportunity at the expo will be Sherpa Kids childcare and education franchises, with start-up costs of under R200 000, which includes the franchise, training and working capital for equipment.
Genevieve Allen, MD of Sherpa Kids, says global statistics show that parents are spending money on their kids and educational and entertainment markets are growing at a consistent rate despite ongoing financial instability.
“This is certainly the case in South Africa’s booming education and childcare franchise sectors. The continued success of franchises in this industry proves that even in these difficult times, parents consider their children’s needs as a priority and will cut back on other expenses to provide for them.”
Sherpa Kids will also sponsor a grand prize of a Sherpa Kids franchise, in partnership with #BuyaBusiness.
The #BuyaBusiness Expo and Small Business Expo will be staged at the Ticketpro Dome in Northriding Johannesburg from the 8th -10th September 2016.